The Kenyan Senate is making progress toward legalizing the use of cryptocurrency as a form of legal tender in the country. Spearheaded by the Senate Standing Committee on Information, Communication, and Technology led by Trans Nzoia Senator Allan Chesang, discussions are currently underway to engage the Central Bank in this regard.
Last year, the Central Bank of Kenya (CBK) released a Discussion Paper on Central Bank Digital Currency. The Paper emphasized the need, opportunities, and risks presented by digital currencies in Kenya. The regulatory framework is expected to explore a large pool of digital payments, including electronic money (e-money), cryptocurrency, stablecoin, and Central Bank Digital Currency (CBDC).
CBDC is defined as a digital currency issued by the central bank and intended to serve as a legal tender. It is the same as fiat currency and is exchangeable one-to-one with fiat currency, only that it is in electronic form. The Central Bank further invited members of the public, industry, and stakeholders to review the various observations in the Paper and provide appropriate feedback.
Also Read: Why a Government-Issued Digital Currency is Bad News
The Senate committee is now looking to push these deliberations further by developing a policy that governs the Central Bank Digital Currency and crypto assets in the country. The goal is to ensure that Kenya harnesses the benefits of financial innovation while minimizing risks.
In January of last year, CBK issued a stern warning against cryptocurrency. However, the institution’s change of stance is timely and reflects its readiness to adapt to the changing times. The involvement of stakeholders is a bold step toward regulation and the legalization of cryptocurrency in Kenya.
Implications of Legalizing Cryptocurrency in Kenya
The legalization of cryptocurrency in Kenya could have numerous positive implications for the country. Firstly, it could help to reduce the cost of remittances for Kenyans living abroad. Currently, the cost of sending money back to Kenya from other countries can be quite high. Cryptocurrency could provide a cheaper and faster alternative to traditional money transfer methods.
Secondly, legalizing cryptocurrency could help to boost financial inclusion in the country. According to the World Bank, only 26% of adults in Kenya have a bank account. Cryptocurrency could provide an avenue for these individuals to access financial services and participate in the global economy.
Thirdly, legalizing cryptocurrency could help to stimulate economic growth in the country. Cryptocurrency has the potential to attract foreign investment and create job opportunities in the crypto industry. This could help to diversify the country’s economy and reduce its reliance on traditional sectors such as agriculture.
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